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3rd Latin American Corporate Governance Roundtable Maria Helena Santana São Paulo Stock Exchange - Bovespa Disclosure and ...
C auses Truly a market requirement <ul><li>The growing influence of  institutional investors </li></ul><ul><ul><li>size (A...
<ul><li>Private sector  - initiatives to stimulate the adoption of greater disclosure </li></ul><ul><li>Public sector  - l...
<ul><li>2001 - Novo Mercado, Levels 1 and 2 </li></ul><ul><li>Examples of  additional disclosure  required: </li></ul><ul>...
Private Sector - ANBID National Association of Investment Banks <ul><li>2002 - New Code of Self-Regulation for the Capital...
Private Sector - ABRASCA Brazilian Association of Public Companies <ul><li>Award for the ‘Best Annual Report’ - 3rd editio...
Private Sector Harmonization of International Accounting Norms and Practices <ul><li>A group is working to stimulate Brazi...
Public Sector <ul><li>Jan/2002 -  Instruction 358  of the CVM (following the approval of the Corporate Law, in Oct/2001) <...
Public Sector <ul><li>In process (in the Congress) – Bill no. 3741 </li></ul><ul><li>Focus on financial statements’ adhere...
Public Sector <ul><li>In hearing - First draft of CVM  Recommendations on Corporate Governance </li></ul><ul><ul><li>manda...
Companies <ul><li>The number of companies that voluntarily disclose additional information is growing </li></ul><ul><li>St...
Companies <ul><li>Internet - IR sites </li></ul><ul><ul><li>already maintained by a substantial number of companies </li><...
Conclusion  - Brazil <ul><li>What we have today is still not enough </li></ul><ul><li>What else can be done? </li></ul><ul...
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3rd Latin American Corporate Governance Roundtable

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3rd Latin American Corporate Governance Roundtable

  1. 1. 3rd Latin American Corporate Governance Roundtable Maria Helena Santana São Paulo Stock Exchange - Bovespa Disclosure and Transparency - A Market Requirement April 2002
  2. 2. C auses Truly a market requirement <ul><li>The growing influence of institutional investors </li></ul><ul><ul><li>size (AUM) </li></ul></ul><ul><ul><li>more demanding posture – bad experiences </li></ul></ul><ul><ul><li>increase in the supervision of pension fund administrators </li></ul></ul><ul><li>Globalization – the influence of other markets with more transparent practices </li></ul><ul><ul><li>inflow of foreign investments </li></ul></ul><ul><ul><li>companies listing on foreign exchanges, mainly on the NYSE (disclosure, yes; investor rights, no) </li></ul></ul>
  3. 3. <ul><li>Private sector - initiatives to stimulate the adoption of greater disclosure </li></ul><ul><li>Public sector - laws and norms </li></ul><ul><li>Companies - greater supply of information and improvements in Investor Relations activities </li></ul>Responses in the last two years
  4. 4. <ul><li>2001 - Novo Mercado, Levels 1 and 2 </li></ul><ul><li>Examples of additional disclosure required: </li></ul><ul><ul><li>related party transactions </li></ul></ul><ul><ul><li>trading and ownership of the company’s shares by the managers and controlling shareholders </li></ul></ul><ul><ul><li>improved Quarterly Reports, including: </li></ul></ul><ul><ul><ul><ul><li>consolidated financial statements </li></ul></ul></ul></ul><ul><ul><ul><ul><li>cash flow </li></ul></ul></ul></ul><ul><ul><ul><ul><li>limited audit review </li></ul></ul></ul></ul><ul><li>2002 - Level 1 becomes the minimum standard for companies that list on the BOVESPA (although we don’t expect any IPOs outside of Novo Mercado or Level 2) </li></ul>Private Sector - BOVESPA
  5. 5. Private Sector - ANBID National Association of Investment Banks <ul><li>2002 - New Code of Self-Regulation for the Capital Market </li></ul><ul><ul><li>range: all members </li></ul></ul><ul><ul><li>scope: prospectus for public offerings, with disclosure at international standards </li></ul></ul><ul><ul><li>restriction: the members may only carry out operations of equities and convertible bonds with companies that are listed, at least, at Level 1 of the BOVESPA </li></ul></ul>
  6. 6. Private Sector - ABRASCA Brazilian Association of Public Companies <ul><li>Award for the ‘Best Annual Report’ - 3rd edition </li></ul><ul><li>Criteria for scoring points: transparency in the </li></ul><ul><ul><li>analysis of economic-financial aspects (MD&A) </li></ul></ul><ul><ul><li>information regarding risk factors </li></ul></ul><ul><ul><li>structures and practices of corporate governance </li></ul></ul>
  7. 7. Private Sector Harmonization of International Accounting Norms and Practices <ul><li>A group is working to stimulate Brazilian adherence to the IFRS - International Financial Reporting Standards </li></ul><ul><li>Brazilian presence at the IASB </li></ul><ul><ul><li>IBEF - Brazilian Institute of Financial Executives </li></ul></ul><ul><ul><li>CFC - Federal Accountancy Council </li></ul></ul><ul><ul><li>IBRACON - Brazilian Institute of Independent Auditors </li></ul></ul>
  8. 8. Public Sector <ul><li>Jan/2002 - Instruction 358 of the CVM (following the approval of the Corporate Law, in Oct/2001) </li></ul><ul><ul><li>disclosure of material information </li></ul></ul><ul><ul><li>disclosure of information in public offerings and large acquisitions </li></ul></ul><ul><ul><li>disclosure of information about trades by managers </li></ul></ul><ul><ul><li>policies for disclosure of information and for trading with the company’s shares (insiders) </li></ul></ul>
  9. 9. Public Sector <ul><li>In process (in the Congress) – Bill no. 3741 </li></ul><ul><li>Focus on financial statements’ adherence to the IASB standards, and: </li></ul><ul><ul><li>cash flow </li></ul></ul><ul><ul><li>value added </li></ul></ul><ul><ul><li>extension to all companies with revenues above R$ 100 MM of the same disclosure obligations as those required of public companies </li></ul></ul>
  10. 10. Public Sector <ul><li>In hearing - First draft of CVM Recommendations on Corporate Governance </li></ul><ul><ul><li>mandatory disclosure, in annual reports, of which recommendations have been adopted by the company </li></ul></ul><ul><li>Two examples of recommendations: </li></ul><ul><ul><li>disclosure, in quarterly financial statements , of the discussion and analysis of the factors that influenced the result </li></ul></ul><ul><ul><li>adoption of a rotation system among auditing companies and restrictions to the contracting of the firm for other services </li></ul></ul>
  11. 11. Companies <ul><li>The number of companies that voluntarily disclose additional information is growing </li></ul><ul><li>Study of 112 companies (excluding those at L1 and NM) </li></ul><ul><ul><li>21 present cash flow statements </li></ul></ul><ul><ul><li>of the 93 in which consolidation is compulsory in the annual financial statements, 61 already present quarterly consolidated statements </li></ul></ul>
  12. 12. Companies <ul><li>Internet - IR sites </li></ul><ul><ul><li>already maintained by a substantial number of companies </li></ul></ul><ul><ul><li>participation in the Latin Finance/MZ Consult Award (2001): Brazil - 161 sites evaluated; Argentina - 18; Chile - 27; Mexico - 74 </li></ul></ul><ul><li>Teleconferences </li></ul><ul><ul><li>becoming more frequent, for discussion of quarterly results and/or relevant facts </li></ul></ul>
  13. 13. Conclusion - Brazil <ul><li>What we have today is still not enough </li></ul><ul><li>What else can be done? </li></ul><ul><ul><li>stimulate the adoption of international accounting standards in Brazil </li></ul></ul><ul><ul><li>work for the approval of the Bill that improves the financial statements (PL 3741) in Congress </li></ul></ul><ul><ul><li>stimulate the companies listed on the BOVESPA and new listings to migrate to the Levels and the Novo Mercado </li></ul></ul><ul><ul><li>develop and help to develop the technological infrastructure so that the information may be accessed with greater ease and rapidity </li></ul></ul>

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